A billboard of Finance Bank in Kabwe town – about 139 km north of the Zambian capital, Lusaka. The country’s central bank on Friday took over the running of Finance Bank Zambia Limited. Photo/ELIAS MBAO

Zambia’s central bank has taken over one of the leading private commercial banks with a view to nationalise it, a move suspected to be President Rupiah Banda’s attempt to settle personal vendetta with the bank’s founder.

Bank of Zambia (BoZ) Governor Dr Caleb Fundanga announced the takeover of Finance Bank Zambia Limited, saying the measure was necessary to protect the interests of depositors, creditors of the bank and safeguarding the stability of the country’s banking sector.

He said the central bank had conducted an inspection on Finance Bank between October 2009 and October 2010 and found a number of “serious breaches” of the law.

Dr Fundanga said the possession of Finance Bank was done in accordance with the law to protect the institution from further damage created by shareholders, directors and senior management that had failed to abide by the law, good governance and management practice.

He added that the central bank has since removed Finance Bank’s managing director and entire management but assured that the bank would continue operating smoothly.

Money laundering

The central bank has appointed FirstRand Limited of South Africa and Leonard Haynes as interim chief executive officer to run Finance Bank during possession period, said Dr Fundanga at a media briefing in Lusaka on Friday.

Economist Highvie Hamududu said the takeover of Finance Bank was “sending fears in the market” because financial services were “very sensitive” particularly that Zambia was just coming from a history of collapse of commercial banks in the 1990s.

“It’s not good news to hear; it’s sending shockwaves to the people and foreign investors,” said Mr Hamududu, an opposition lawmaker.

Zambia’s The Post newspaper that published an exposé on Thursday about the pending takeover of Finance Bank said President Banda’s administration wanted to nationalise the bank in a bid to cut off the influence of Dr Rajan Mahtani – a Zambian of Indian origin and founder of the bank – and ensure he got nothing. The central bank has since dismissed The Post article.

Dr Mahtani, an influential man in Zambia’s business and political circles, quit as chairperson of Finance Bank in February this year following money laundering allegations against him.

At the time, Dr Mahtani said his decision to resign was entirely in the interest of the “continued prosperity” of Finance Bank and to “freely defend certain allegations” against him and thereby “protect his integrity and that of the bank”.